A new product is being considered by ABC Inc The after tax cash flows at time zero include an outlay for depreciable equipment (I0) of $16M (M million) and $2 2M for additional net working capital (NWC) The project is expected to have an 8 year life (n 8), and the equipment will be depreciated on a straight line basis to a zero book value (B 0) over 8 years When the project terminates in eight years, it is anticipated that the market or salvage value (S) will be $2M and the net working capital will be released The cash flows before tax (CFBTt) for the project are expected to be $5M per year The discount rate (r) is 16 , and the relevant tax rate (T) is 35 Answer the below questions a) What are the initial cash flow (CF0) b) What is the after tax cash flow for each year c) What is the depreciation tax shield per year (DTSt) (4 marks) d) What is the operating cash flow (OCF) for year 1 to year 7 (CF1 CF7) e) What is the final year cash flow of the project (CF8) f) What is the net present value (NPV) of the proposed project A new product is being considered by ABC Inc The after tax cash flows at time zero include an outlay for depreciable equipment (10) of $16M (M million) and $2 2M for additional net working capital (ANWC) The project is expected to have an 8 year life (n 8), and the equipment will be depreciated on a straight line basis to a zero book value (B 0) over 8 years When the project terminates in eight years, it is anticipated that the market or salvage value (S) will be $2M and the net working capital will be released The cash flows before tax (CFBTt) for the project are expected to be $5M per year The discount rate (r)is 16 , and the relevant tax rate (T) is 35 Answer the below questions a) What are the initial cash flow (CFO) (2 marks) b) What is the after tax cash flow for each year (2 marks) (4 marks) c) What is the depreciation tax shield per year (DTS ) d) What is the operating cash flow (OCF) for year 1 to year 7 (CF1 CF7) e) What is the final year cash flow of the project (CF8) (4 marks) (4 marks) f) What is the net present value (NPV) of the proposed project (6 marks)

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A new product is being considered by ABC Inc. The after-tax cash flows at time zero include an outlay for depreciable equipment (I0) of $16M

A new product is being considered by ABC Inc. The after-tax cash flows at time zero include an

outlay for depreciable equipment (I0) of $16M (M = million) and $2.2M for additional net working

capital (NWC). The project is expected to have an 8-year life (n=8), and the equipment will be

depreciated on a straight-line basis to a zero book value (B=0) over 8 years. When the project

terminates in eight years, it is anticipated that the market or salvage value (S) will be $2M and the

net working capital will be released. The cash flows before tax (CFBTt) for the project are expected

to be $5M per year. The discount rate (r) is 16%, and the relevant tax rate (T) is 35%.

Answer the below questions:

a) What are the initial cash flow (CF0)?

b) What is the after-tax cash flow for each year?

c) What is the depreciation tax shield per year (DTSt)?

(4 marks)

d) What is the operating cash flow (OCF) for year 1 to year 7 (CF1 - CF7)?

e) What is the final year cash flow of the project (CF8)?

f) What is the net present value (NPV) of the proposed project?

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A new product is being considered by ABC Inc. The after-tax cash flows at time zero include an outlay for depreciable equipment (10) of $16M (M= million) and $2.2M for additional net working capital (ANWC). The project is expected to have an 8-year life (n=8), and the equipment will be depreciated on a straight-line basis to a zero book value (B=0) over 8 years. When the project terminates in eight years, it is anticipated that the market or salvage value (S) will be $2M and the net working capital will be released. The cash flows before tax (CFBTt) for the project are expected to be $5M per year. The discount rate (r)is 16%, and the relevant tax rate (T) is 35%. Answer the below questions: a) What are the initial cash flow (CFO)? (2 marks) b) What is the after-tax cash flow for each year? (2 marks) (4 marks) c) What is the depreciation tax shield per year (DTS:)? d) What is the operating cash flow (OCF) for year 1 to year 7 (CF1 - CF7)? e) What is the final year cash flow of the project (CF8)? (4 marks) (4 marks) f) What is the net present value (NPV) of the proposed project? (6 marks)